The arrest last month of Mikhail Khodorkovsky, the principal owner of Russia’s biggest oil company, Yukos, and the richest of the country’s seventeen state-anointed billionaire oligarchs, on charges of fraud and tax evasion has put Russia back in the forefront of US media attention. But is the story being reported the full, or essential, one?
It’s being told as follows. Although Khodorkovsky, like all of Russia’s “wealthy businessmen,” acquired his company (currently valued at roughly $45 billion) at little if any cost to himself through “murky” insider dealings in the 1990s, when the enormous natural resources of the former Soviet state were being privatized under then-President Boris Yeltsin, he has since transformed Yukos into a model for a new capitalist, democratic Russia–“transparent,” exceedingly profitable, even philanthropic. So much so that it has helped fuel a Russian “economic rebound” while becoming a potential source of oil for the United States.
Unlike other, less “clean” oligarchs, the story continues, Khodorkovsky is being persecuted by President Vladimir Putin chiefly because the oil baron became active in Russia’s democratic politics, funding opposition parties in next month’s parliamentary elections and even aspiring to the presidency. To crush Khodorkovsky and make an example of him, Putin is relying on a Kremlin faction he has recruited largely from the KGB, where he began his own career, which wants Yukos’s wealth for itself. The result will therefore be a grievous blow to Russia’s “booming economy” and democracy, replacing free-market-oriented “liberal oligarchs” with much worse and less efficient ones and driving away needed foreign investment.
Some elements of this story, which relies very heavily on Moscow sources associated with the “liberal oligarchs,” are plausible, but others are not. Democracy in Russia has been failing ever since Yeltsin made oligarchical privatization possible by destroying an elected parliament in 1993, and neither side is interested in truly reviving it; the oligarchs are zealous monopolists, not free-market reformers, and Western investors interested in Russia’s huge oil reserves have already indicated that they care about official guarantees of the contracts, not who signs them; Putin now controls elections sufficiently to get substantially the legislature he wants; and no one of Jewish origin, as are Khodorkovsky and most of the other oligarchs, can be elected president of Russia. Above all, however, the prevailing media account omits the essential background and context.
Privatization–or “piratization,” as it is often called in Russia–did not take place in an economic or social vacuum. It was accompanied in the 1990s by the worst economic depression of modern times and the impoverishment of a great many Russians, probably the majority of them. In the process, it created the oligarchical economic system that exists today. In 2000, Yeltsin-era oligarchs, fearfully aware that they were loathed by most Russians–they still refer to them contemptuously as a “Communist populace”–and that they lacked any real legal legitimacy, put Putin in the Kremlin to be a praetorian president safeguarding the system, its creators and its beneficiaries in business, politics, the media and even intellectual circles.